**[investwise]** Are We Sowing The Seeds For A Real Estate Bubble?

 

Have we hit the tops in the Real Estate market? what would happen to the investors who are banking upon the successful IPOs of 18 Real Estate cos which are stuck mid-way between completion and delivery for want of funds. If need, we have hit a peak, who will save the investors, IPOs, and the existent players-DLF and Unitech? Puny Gurgaon-a satellite suburb of Delhi now boasts of more millionaires than all of Delhi put together. With average psft rate of Rs 8000 or more, any apartment of 5000 sq feet now sells for over Rs 4 crore in Gurgaon-a suburb that is more Haryana than Delhi, has no basic infrastructure, lacks water and power supply but boasts of a better status than Delhi in political terms.  Something similar has happened and failed in Europe and the US, and is now visible in Australia and Japan where low interest rates has meant easy credit for inflating existing asset bubble. I would be very wary of anyone investing in Real Estate concerns active in Gurgaon or the string of Real Estate IPOs which are slated to come forth over the next 6 months. An article from "The Daily Telegraph" is appended-maybe investors would sit up an notice how over-valued DLF and Unitech are. "Residex figures show 5347 Sydney streets now on millionaires' row" The article comes from The Daily Telegraph. It explains: "Boasting an address in millionaires' row used to be the preserve of Sydney's elite. But thanks to the property boom close to one-in-five Sydney streets can now claim the same bragging rights." And it's not just Sydney, apparently Melbourne has 4,222 streets with a median price above $1 million per house, and even little ol' Hobart has 13 streets with the median price above a million. We think that takes top billing as an example of Preposterous Property Spruiking. It seems pretty obvious to us that the Australian market is almost out of puff and therefore the spruikers - including the mainstream press - have to come up with any half-cocked statistic that makes it seem like buying property right now is a great idea. But is this genuinely the top of the market, just before the steep and scary decline? To be honest, we don't know. It looks and feels like it is. But something's holding us back from calling it. It just doesn't seem right. In our mind there are still too many people who agree with our view of a property bubble. For a contrarian that's an uncomfortable feeling. We prefer be stuck out on our own with no company but for the Goldbugs and stock market bears. In fact, privately we'd always thought the signal for the top of the housing market would be when the number of abusive emails into the Money Morning mailbag went off the chart. The type of email that would say, "We didn't buy a house because of you and now we never will because we can't afford it... you b@#$%^d!" But that hasn't happened. In total we've only received about three emails of a similar nature over the last eighteen months. In other words, what I'm saying is that while all the signs shout "Housing Bubble", odds are the pop will happen when we least expect it. When no-one's looking. Right now there still seem to be too many people on the bubble-bursting bandwagon. Even so, a collapse in 2010 still looks to be the odds on favourite, but if we're honest we thought 2009 looked like an unbackable favourite at the time. We're often asked what will be the trigger for the collapse when it happens. While the banks are inseparable from the property market, our guess is the ultimate trigger for the collapse will come from the Reserve Bank of Australia (RBA). Just as the over-confidence of the government caused it to slash the wrists of the mining sector, thinking that because it had saved the economy it could do it again by killing the resources industry, so the RBA will suffer from its own bout of over-confidence. That's apparent from some of the recent speeches we've seen from the RBA, such as Dr. Luci Ellis' comments last week about there not being a credit-fuelled bubble in house prices. The RBA seems fond of pulling levers in its attempts to manipulate the economy, it's now just a case of when it will pull one lever too many. Stay tuned. The RBA meets for its monthly lever pulling session next week. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.   Nothing in this article is, or should be construed as, investment advice.

__._,_.___

Reply to sender | Reply to group | Reply via web post | Start a new topic

Messages in this topic (1)

Recent Activity:

• New Members 2

Visit Your Group

*****************************************
http://in.groups.yahoo.com/group/investwise/

INVESTMENTS IN INDIA
We are low-risk, long-term investors. 

Stocks, mutual funds and the entire investment gamut.  Only financing/investment avenues in India will be discussed. 

For any assistance, questions or improvement ideas, contact investwise-owner@yahoogroups.co.in

****************************************************************

NEW! ==== Check our LINKS and FILES sections for a world of information. REGULARLY UPDATED.

NEW! ==== Check "Tracklist" in Links and Files sections for Investment Ideas.

****************************************************************

Switch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use

.

__,_._,___